Asset-based lending (ABL) is a type of financing that uses a company’s assets as collateral for a loan. It is a form of secured lending where the borrower pledges its assets to secure the loan, and the lender uses the value of those assets as the basis for determining the loan amount.


In ABL, the assets that can be used as collateral may include accounts receivable, inventory, equipment, real estate, or other tangible assets. These assets are evaluated by the lender to determine their value and the amount of funding that can be provided.

ABL is commonly used by businesses that have substantial assets but may lack sufficient cash flow or have limited access to traditional forms of financing. It is particularly useful for companies in industries such as manufacturing, wholesale distribution, or retail, where there is a significant amount of working capital tied up in assets.

The loan amount in asset-based lending is typically based on a percentage of the appraised value of the collateral. The borrowing company continues to own and operate the assets used as collateral, but the lender has a security interest in those assets until the loan is repaid.

ABL offers several advantages. It provides businesses with access to capital based on the value of their assets rather than relying solely on their creditworthiness. It can also provide more flexibility compared to traditional loans, as the borrowing capacity can increase as the value of assets grows.

However, asset-based lending may involve higher interest rates and fees compared to other forms of financing due to the increased risk associated with the collateralized assets. Additionally, the lender may require periodic monitoring of the collateral and financial reporting from the borrower.

Overall, asset-based lending is a financing option that allows businesses to leverage their assets to obtain the capital needed to support their operations, growth, or other financial objectives.